The Biden Administration may be good for Tutor Perini Corp.
That was the opinion of Ronald Tutor, chief executive of the Sylmar construction and engineering services company.During a conference call with analysts to discuss fourth-quarter earnings, Tutor said the company’s pipeline of large civil projects was likely to grow with the passage of the long-awaited infrastructure improvement program that had been talked about for four years when Donald Trump was president and was now at the forefront of President Joe Biden’s agenda.
“So, Tutor Perini is once again very well-positioned to benefit from the combination of strong pent-up customer demand and the increased likelihood of the infrastructure bill funding from the federal government,” Tutor said during the call.
The company reported on Feb. 24 net income of about $35 million (69 cents a share) for the quarter ending Dec. 31, compared with a net loss of $86 million (-$1.71) in the same period a year earlier. Revenue increased by 15 percent to $1.3 billion.
The company attributed the growth in revenue to increased activities on several large infrastructure projects in California and the Northeast, as well as various building projects in California.Over the past 52 weeks, Tutor Perini’s share price has increased by nearly 9 percent to a closing price of $16.22 on March 3. Shares closed at $19.24 on March 10.
Current projects for the company include the California high-speed rail project in the Central Valley; the Metro Purple Line extension beneath Wilshire Boulevard in Los Angeles; the $1.4 billion terminal one at Newark Airport in New Jersey; and the $800 million Minneapolis Southwest Light Rail project.Escalating target priceBrent Thielman, senior research analyst with D.A. Davidson & Co., mentioned the government infrastructure program in explaining the reasons for raising his price target to $22 from $18 in a research note on Feb. 25.
The $22 price target is 10 times the earnings per share estimated for this year, and five times the estimated earnings before interest, taxes, depreciation and amortization number, Thielman wrote.
“This reflects both increases in industry peer valuations and apparent optimism around an infrastructure agenda in Washington to come,” he added.
In the fourth quarter, the three divisions that make up Tutor Perini – building, civil and specialty contracting – all had revenue increases from the same period in the previous year.
Civil revenues went up by 19 percent to $532 million. Gary Smalley, the chief financial officer, attributed the increase to the absence of the prior year revenue reduction associated with the SR 99 charge that the company took in the fourth quarter of 2019. That charge was connected with an unfavorable court ruling in the case involving the SR 99/Seattle tunnel project that the company was a contractor on. It is appealing the ruling, Smalley said during the conference call.
Building segment went up 12 percent to $522 million while specialty contractor segment revenue increased by 11 percent to $296 million. Both were the result of increases in project activities in California and elsewhere in the U.S., Smalley added.
The company’s backlog was down by 26 percent to $8.3 billion in the fourth quarter when compared with the same period in the prior year.Tutor said during the call with analysts that the backlog provides stability over the next seven years, with such large projects as the ones for the Los Angeles County Metropolitan Transportation Authority, California High Speed Rail and Minneapolis Light Rail.He anticipated the backlog decline to continue through the first half of this year as delays in awarding new contracts and solicitations of new work may continue, Tutor said.
“But we are seeing many of those major projects we were tracking (to) bid in 2020 now coming back on the street … which should significantly increase the potential for backlog in the second half of this year,” Tutor added.The company expects revenue growth from its existing backlog of large multiyear civil infrastructure projects on the West Coast and in Guam, where the federal government has just published a list of bids for this year that total more than $1 billion, he continued.
Offsetting the growth is the looming completion of certain large projects, including the Newark airport terminal this year, Tutor said.